We can always count on Barron’s Alan Abelson to lay blame precisely where it belongs: At the feet of the maestro, Sir Alan Greenspan:
"To be anxious is not, of course, to be devoid of compassion. And as we watched the great unraveling of that tangled web that financial engineering spun, we couldn’t help but think of the acute discomfort being felt by that outstanding public servant Alan Greenspan, who, during his celebrated tenure as head of the Federal Reserve, more than anyone deserves credit for nurturing the ownership society. Mr. Greenspan, lest we forget, went far beyond the call to entice people, no matter what their circumstances, into buying a home by whacking the cost of credit to as near zero as you can get and still lay claim to being somewhat rational, and urging them to go for those new-fangled adjustable mortgages with deceptively low initial interest rates.
Beyond even his cleverness at blowing successive "smart bubbles," so that the newest one (for example, housing) was nicely calculated to offset the fallout from its burst predecessor (the stock market), and his adroit ability to please his political masters (his overriding passion has always been to be liked), nothing more distinguished Mr. Greenspan’s long stint at the Fed than his timing in departing from that august body.
As his successor, gentle Ben Bernanke, is no doubt becoming ruefully aware, creating a mess is easy. The trick is in knowing when to slip out, leaving someone else with the job of cleaning it up. And here Mr. G has proved himself an undisputed master.
Financial mischief on such a grand scale is not a one-man job, and Mr. Greenspan, needless to say, had a lot of help from Wall Street, Washington and points north, south and west. But there’s no diminishing the singular part he played.
And just as the contempt for risk that made possible the gross extravagances in housing and the financial markets was sustained by confidence that Mr. G would always bail out the participants — the so-called Greenspan put — so the current collapse in housing and the financial markets merits a special designation, one that similarly recognizes his critical role. How about the Greenspan Kaput?"
After the Greenspan Put…
Barron’s August 13, 2007
UP AND DOWN WALL STREET